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OpenMarket: Trade and International

  • Trans-Pacific Partnership Signed, Provisions a Mixed Bag

    February 4, 2016 2:56 PM

    U.S. Trade Representative Michael Froman signed the Trans-Pacific Partnership Agreement (TPP) in Auckland, New Zealand, yesterday, together with ministers from 11 other Pacific-rim countries (Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam).

    Since the signing took place on the earliest possible date under rules set in Trade Promotion Authority (TPA), it seems clear that the Obama administration wants to move quickly on TPP, knowing that this controversial trade pact could get bogged down in the presidential election cycle.

    Now that the agreement is signed, a complex series of dates and rules mandated under TPA takes effect, principally involving the administration and the Senate Finance Committee and the House Ways and Means Committee before Congress can consider the pact.

    Finance Committee Chairman Orrin Hatch (R-Utah) in a floor speech yesterday emphasized those steps and noted that the final vote on the trade agreement could be years in the making.

    TPP, a deal that represents almost 40 percent of the world’s GDP, is a massive agreement, not only because of its breadth and its length of 599 pages, but also because it deals with a host of issues that aren’t integral to free trade. Including numerous extraneous issues creates much more contentious debate on trade agreements and almost makes trade itself an extraneous issue in trade agreements.

  • Interchange Fee Warnings Coming True in EU

    February 2, 2016 10:02 AM

    We have often warned about the negative effects of interchange fee regulation and specifically a cap on interchange fees. Last year we warned the European Parliament that a proposed EU-wide cap on interchange fees would cause many banks to raise fees and interest rates on all their customers, not just those who use debit or credit cards. We said:

    Capping interchange fees has been tried in some countries around the world.  Despite claims that these efforts were for the benefit of consumers, the real world results have shown the opposite to be true. In every instance, consumers faced higher fees for banking services, a reduction in benefits and services and saw no return in the form of lower prices from merchants despite promises by merchants and policy makers to pass savings to consumers.

    We also noted in April that banks were already cutting back on card reward schemes.

  • The EU Faces Many Challenges in 2016

    January 7, 2016 12:11 PM

    The EU is in a quiet crisis. For the first time it faces the prospect of a major economy leaving the EU voluntarily. Its internal structure for free movement of people is collapsingNationalist governments of one stripe or another are being elected. And a militarily assertive Russia provides another headache.

    The problem is that the EU over-reached. It went from being a trade pact to a proto-federal state without the permission of the peoples it brought together. Its market harmonization turned into federal regulation. EU peoples felt disenfranchised as a result. They want more power over their borders and the economies. Europe has to find a way of granting that without falling apart.

    That may be possible. David Cameron does not want the UK to leave the EU. He called the summit in February to find a way forward to end the will-they, won’t-they speculation over Britain leaving the EU and agreement over looser control over one nation could be applied to others.

    The trouble is that Cameron’s demands are presently unacceptable to his European partners and unlikely to assuage the anger of British voters over high immigration levels. If he does reach agreement with his European partners the pro-Brexit forces are likely to brand him a sell-out. It’s hard to see a way Cameron wins. His best bet is get a better-than-expected deal and call a snap referendum.

  • Ex-Im Is Back from the Dead, Kind of

    December 10, 2015 2:49 PM

    On Friday, President Obama signed into law a five-year, $305 billion highway bill. Marc Scribner, CEI’s resident transportation expert, has his thoughts on the larger bill. But there is one highway-unrelated provision I will comment on: the Export-Import Bank’s revival.

    Ex-Im has been in liquidation for the last five months. The highway bill revives it through September 2019 (see pp. 778-99). Unlike most other agencies, Ex-Im’s charter expires every now and then, and Congress has to renew it for it to continue existing.

    So while reformers won an important battle, we have lost the war, at least for a few years. The loss stings, but it does bring to mind Ronald Coase’s observation that an economist who “is able to postpone by a week a government program which wastes $100 million a year (what I consider a modest success) has, by his action, earned his salary for the whole of his life.” Coase wrote those words in 1975. His point remains true after forty years of inflation.

  • COOL Ruling Puts U.S. in the Hot Seat

    December 4, 2015 5:06 PM

    In a move intended to avoid harmful retaliatory tariffs from Canada and Mexico, five Democratic senators wrote to both majority and minority Senate leaders, asking them to repeal the Country of Origin Labeling (COOL) requirements for beef and pork. The leadership should heed their call, and the lead of the House of Representatives.

    Democratic Sens. Diane Feinstein and Barbara Boxer of California, Mark Warner and Tim Kaine of Virginia, and Joe Donnelly of Indiana asked Majority Leader Mitch McConnell (R-Ky.) and Minority Leader Harry Reid (D-Nev.) to quickly vote to repeal the labeling law before the World Trade Organization (WTO) allows Mexico and Canada to assess up to $3 billion of tariffs on U.S. goods exported to those countries. The WTO is expected to authorize these measures in December.

    The House had already voted for a repeal earlier in 2015. Now it’s time for the Senate to act.

    The original COOL rule, part of the 2008 U.S. farm bill, mandated that the “Made in America” label could only be applied to meat products from animals that had been born, raised, and harvested in the U.S. That meant that livestock that was born in the U.S., raised in Canada or Mexico, and slaughtered in one of those countries had to carry labeling information outlining all those details, and to be checked and verified along the supply chain.

    However, in 2009 Canada and Mexico brought a complaint to the World Trade Organization, alleging that the rule discriminated against those two countries and violated the WTO rule on Technical Barriers to Trade (TBT).

  • Text of Trans-Pacific Partnership Trade Pact Released

    November 5, 2015 1:58 PM

    The office of the U.S. Trade Representative (USTR) has released the complete text of the Trans-Pacific Partnership Agreement (TPP) – a huge trade pact among 12 countries bordering the Pacific Ocean. The agreement is also a big deal in its volume, with 30 chapters, four annexes, 55 “related instruments,” and two bilateral non-tariff agreements with Japan. According to the New Zealand trade minister, when New Zealand released the text earlier, “the large number of documents released today amount to over 6,000 pages of text and market access schedules.” 

    The Parties to the TPP are a mix of large, developed economies and smaller emerging markets: United States, Canada, Mexico, Peru, Chile, Malaysia, Vietnam, Japan, Singapore, New Zealand, Australia, and Brunei.

  • Ex-Im Revival Passes the House

    October 28, 2015 6:22 PM

    The House has passed Rep. Stephen Fincher’s Ex-Im revival bill, by the margin of 313-118. Senate Majority Leader Mitch McConnell has publicly said the Senate will not act on the bill, so last night’s vote was more of a public statement than anything else. While the statement might be unpleasant, the public now has a much better idea of which Congressmen are pro-business, as opposed to pro-market—an important distinction. So at the very least, voters now have a better idea of who to hold accountable, and who they might support in primary elections.

    With no stand-alone vote, Ex-Im reauthorization will instead be folded into an upcoming must-pass transportation bill. A Senate vote on that could happen as soon as next week.

    Both parties share blame for Ex-Im’s possible revival. Nearly all Democrats voted in favor of reviving Ex-Im—a curious reversal of decades-long opposition. Rep. Alan Grayson (D-Fla.) is the only one to stay consistent. Progressives have been Ex-Im’s traditional opponents, not just on corporate welfare grounds, but on human rights grounds—Ex-Im subsidizes many governments with checkered human rights records, and helps to keep them in power. See for example, this Mother Jones article from 1981this one from 1992, and another from as recently as 2011, which is based on environmental grounds.

    The GOP’s small pro-market wing began actively opposing Ex-Im in 2012, so Mother Jones therefore changed its stance around that time; see here and here. See also a thoughtful piece at Salon on this curious role reversal.

  • Signs of Life for Ex-Im?

    October 27, 2015 12:53 PM

    Last night the House of Representatives voted on a rare discharge petition, under which a controversial bill can skip the usual committee process and go straight to a floor vote. In this case, the discharged bill is Rep. Stephen Fincher’s Export-Import Bank revival bill. It passed, 246-177, with 62 Republicans joining nearly all Democrats. It was the first successful discharge petition since the McCain-Feingold campaign finance regulation bill. For more on discharge petitions, see my earlier post.

    So what happens now? On Tuesday, the House will hold further procedural votes on the Ex-Im bill, which will almost certainly pass. Then it’s off to the Senate, which is unlikely to act on the bill.

  • Latest Ex-Im Revival Tactic: The Discharge Petition

    October 13, 2015 3:58 PM

    One of the classic lines from the 1990 novel and 1993 movie Jurassic Park is that “life finds a way.” As with dinosaurs, so with government programs. The Export-Import Bank expired on June 30, and has been in liquidation ever since. But Ex-Im’s supporters may have found a way to bring it back to life. Just as frog DNA implanted in Jurassic Park’s all-female cloned dinosaurs allowed them to reproduce by causing some of them to switch genders, Rep. Stephen Fincher (R-Tenn.), who once opposed Ex-Im, has found a way to get Ex-Im past its own obstacles in the House: a discharge petition.

    In the House of Representatives, a bill must typically be approved by a Committee before it moves to a full floor vote before all 435 members. A successful discharge petition circumvents Committees and brings a bill straight to a floor vote, but it is rarely used. The last time a discharge petition succeeded was in 2002—ironically, in Fincher’s case, for the McCain-Feingold campaign finance regulation bill.

    Fincher’s re-election campaign has received about 150 donations totaling a little more than $250,000, as of the most recent campaign finance disclosures. Two of those donations come from his home state of Tennessee, totaling $750. As journalist Tim Carney puts it, this “rounds to 0 percent of his money raised.” In total, “More than 99 percent of the money powering Fincher's re-election bid comes from political action committees (almost all of them corporate PACs) and K Street lobbyist types.” Among those corporate PACs are all of Ex-Im’s biggest beneficiaries, including Boeing, General Electric, and other large firms.

  • Trans-Pacific Partnership Agreement Covers a Lot of Ground

    October 7, 2015 1:32 PM

    Trade ministers of 12 Asia-Pacific countries announced October 5, 2015, that they had completed negotiations on the Trans-Pacific Partnership Agreement (TPP). The TPP links together the U.S., Canada, Mexico, Australia, New Zealand, Japan, Chile, Peru, Malaysia, Singapore, Vietnam, and Brunei in a broad trade agreement among countries that represent about 40 percent of the world’s GDP. The trade pact includes 30 chapters dealing with traditional trade issues such as market access and tariffs, while significantly expanding the purview of trade agreements with chapters focusing on such issues as labor, the environment, intellectual property, electronic commerce, and others.

    As summarized on the U.S. Trade Representative’s website and elsewhere, the agreement does provide some definite positives: It eliminates or reduces tariffs on a broad range of industrial and agricultural goods; it takes steps to open up the Canadian and Japanese dairy markets to more imports; it allows more sugar to be imported into the U.S. to help sweetener users meet demands stifled by the U.S. sugar program; it phases out over a very long period U.S. tariffs on Japanese autos and makes inroads into Japan’s non-tariff restrictions on U.S. auto imports; it addresses other non-tariff trade barriers by affirming that restrictions on imports in the name of safety or environmental harm have to be based on science; it streamlines customs procedures for more timely deliveries.

    What’s unique about TPP, among many issues, is the fact that labor and environment disputes among the parties are subject to the same dispute settlement procedures as commercial disputes. Subjecting commitments in the Labor and Environment chapters to dispute settlement—the same enforceability mechanism available for other chapters of the TPP Agreement—including the availability of trade sanctions. Subjecting commitments in the Labor and Environment chapters to dispute settlement—the same enforceability mechanism available for other chapters of the TPP Agreement—including the availability of trade sanctions.Subjecting commitments in the Labor and Environment chapters to dispute settlement—the same enforceability mechanism available for other chapters of the TPP Agreement—including the availability of trade sanctions.Thus, these non-trade issues are raised to the level of traditional trade issues, which marks a new incursion into using trade as a vehicle for special interests.

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